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BENEFITS STRATEGY & BENCHMARKING SURVEY EXECUTIVE SUMMARY & STRATEGIC INSIGHTS 2017 Guiding Your Ascent with Data
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Page 1: Guiding Your Ascent with Data - Home | Gallagher Surveys...The potential to drive business performance by aligning compensation, benefits and communication strategies is often overlooked.

BENEFITS STRATEGY & BENCHMARKING SURVEYEXECUTIVE SUMMARY & STRATEGIC INSIGHTS

2 0 1 7

Guiding Your Ascent with Data

Page 2: Guiding Your Ascent with Data - Home | Gallagher Surveys...The potential to drive business performance by aligning compensation, benefits and communication strategies is often overlooked.
Page 3: Guiding Your Ascent with Data - Home | Gallagher Surveys...The potential to drive business performance by aligning compensation, benefits and communication strategies is often overlooked.

Arthur J. Gallagher & Co. AJG.COM 1

Survey Overview ........................................................................................2

Key Findings & Implications .........................................................................4

Final Remarks ............................................................................................8

About Gallagher .........................................................................................9

Contributors .............................................................................................10

Table of Contents

This Executive Summary focuses on the key findings of our research — insights drawn from significant patterns identified within the data — and their strategic implications.

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2017 BENEFITS STRATEGY & BENCHMARKING SURVEY Executive Summary & Strategic Insights 2

SURVEY OVERVIEW

Survey Overview Staying on top of benefits and human resource changes takes endurance. When climbing an ever steeper competitive

slope, employers need the latest information on how to negotiate unsteady terrain such as new regulations,

demographic shifts, and technology disruptions in revenue and profit models. Gallagher’s 2017 Benefits Strategy &

Benchmarking Survey provides data and insights that help steadily guide you along the path to peak performance.

Gallagher’s comprehensive survey, conducted from January to March 2017, aggregates responses from 4,226

organizations across the United States. More than 300 questions covering the total compensation spectrum were

included, using data parameters that allow you to focus on results specific to your relevant market.

In addition to this Executive Summary, a comprehensive U.S. National Report is available covering major

benefits and related categories. They include Human Capital Strategy, Medical Benefits, Employee Wellbeing,

Employee Communications, Employee Engagement, Dental Benefits, Life Insurance & Voluntary Benefits, Absence

Management, and Retirement Benefits. Each section features core data highlights and wraps up with key takeaways,

followed by tables that show participants’ responses to survey questions. From broad insights to specific findings, you

gain a practical perspective on significant trends and best practices that Gallagher is observing firsthand.

To discuss your human capital vision and strategies for reaching new heights of performance, contact your local

Gallagher representative or one of the advisors listed on the back cover.

60%FOR PROFIT

40%NONPROFIT

Ownership Structure

11%

30%

16%

26%

17%

SOUTHEAST

Geography

SOUTH CENTRAL

NORTHEAST

WEST

NORTH CENTRAL

Workforce Size — Full-Time Employees (FTEs)1

SMALL EMPLOYER — UNDER 100 FTEs

LOWER MIDSIZE EMPLOYER — 100 to 499 FTEs

UPPER MIDSIZE EMPLOYER — 500 to 999 FTEs

LARGE EMPLOYER — 1,000 OR MORE FTEs

46%

33%

9%

11%

1Due to rounding, percentages do not total 100%

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Arthur J. Gallagher & Co. AJG.COM 3

SURVEY OVERVIEW

PUBLIC ENTITY

441MANUFACTURING

550HEALTHCARE

418EDUCATION

509

BUSINESS SERVICES

359FINANCIAL SERVICES

240

TECHNOLOGY

214

CONSTRUCTION

277SOCIAL SERVICES

223

ENERGY

116

RETAIL

212WHOLESALE

133HOSPITALITY/RESTAURANT/

ENTERTAINMENT

160

TRANSPORTATION

121ASSOCIATIONS

89LEGAL

75

RELIGIOUS INSTITUTIONS

58PHARMACEUTICAL

31

Number of Participating Organizations by Industry

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2017 BENEFITS STRATEGY & BENCHMARKING SURVEY Executive Summary & Strategic Insights 4

KEY FINDINGS & IMPLICATIONS

Key Findings & ImplicationsMuch like mountain climbers aspiring to reach the summit, employers are striving to achieve 360-degree integration across total compensation strategies and programs. A big-picture perspective makes it possible to more fully address employee wellbeing and human capital talent needs while controlling costs and managing risk. As employers gain a deeper understanding of how these elements work together, they can see more clearly how to align human resource and organizational strategies to drive better business results.

Human resource departments serve as a base camp for

organizational effectiveness. In fulfilling this function,

they face persistent challenges, including changing

workforce demographics, regulatory complexity and a

competitive labor market. This summary offers insights

to help employers execute on three key steps — assess,

map, and climb — so they can overcome obstacles on

their way to growth and profitability.

AssessEmployers are at different places on the path to

an integrated, holistic approach to benefits and

compensation. They use different sets of tools to meet

their goals and are equipped with different experiences

and expertise. Regardless, benchmarking data can

anchor them along the way with insightful analysis of

their current programs, policies and incentives, framing

their expectations and identifying gaps. Key insights

related to assessment — the first foundational step —

are described on the next page.

COMPENSATION

360-degree view

WELLBEING

COMMUNICATIONS

ENGAGEMENT

DENTAL

LIFEINSURANCE

VOLUNTARY

ABSENCE MANAGEMENT

RETIREMENT

MEDICAL AND PHARMACY

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Arthur J. Gallagher & Co. AJG.COM 5

KEY FINDINGS & IMPLICATIONS

Evolving employer priorities reflect a need to make

the most of human capital investments and drive

business growth.

• Attracting and retaining a competitive workforce

is the top operational priority for 58% of

employers, and attracting (43%) and retaining

(41%) talent rank as the second and third most

important HR priorities.

• Controlling benefit costs remains the highest HR

priority at 52%, but declined slightly in overall

importance compared to 2016. However, boosting

workforce engagement and productivity (37%)

and creating a strong workplace culture (33%)

increased in importance.

• Properly administering and managing lost time

is a top pursuit for 62% of employers, including

Family Medical Leave Act (FMLA) compliance,

incidental absences, short-term disability, workers’

compensation, and related implications of the

Americans with Disabilities Act (ADA) and the

ADA Amendments Act.

Employers are still challenged by talent acquisition and

retention, healthcare costs, wellbeing and engagement.

• Nearly one-third or more midsize and large

employers report 15% or greater turnover in

full-time employees.

• Increases in employee contributions to the cost of

premiums (48%) and higher cost sharing through

plan design changes (48%) remain the top two

healthcare cost-control tactics.

• While promoting health and wellbeing is an

organizational priority for over two-thirds of

employers, just 52% believe they have an effective

wellbeing strategy.

Tactics are often hindered by a lack of strategy,

highlighting opportunities to get better value from

health and human capital investments.

• An increased use of tactics to improve employee

engagement occurred across all sizes of employers,

especially large employers that reported double-

digit increases for all tactics. Yet, less than half

of employers (44%) report a formal strategy to

strengthen employee motivation, satisfaction and

commitment to the organization.

• Approximately two-thirds of employers offer long-

term disability and short-term disability or salary

continuation. Far fewer (44%) have developed an

absence management strategy for administering

leaves for both occupational and non-occupational

disabilities.

Map Once employers have clearly and completely assessed

the status of their compensation and benefits, they’re

prepared to determine where to go next and what it

will take to achieve their goals. This next step includes

thoughtful, integrated planning that connects the

dots between compensation and benefits, policies,

and program offerings — as well as organizational

objectives. Directional insights below point to

opportunities for increasing the planning time horizon

and for striving toward greater alignment between HR

strategies and business goals.

The potential to drive business performance by aligning

compensation, benefits and communication strategies

is often overlooked.

• Half of employers view compensation and benefits

as tools to attract and retain talent. Just 31%

regard compensation and benefits as investments in

maximizing workforce performance and achieving

business objectives.

• Employers identified greater effectiveness of their

communications as the most helpful solution for

managing HR-related challenges and opportunities

(62%). Yet, only 15% have a comprehensive

communication strategy. Employers typically

use communication strategies for some of their

programs such as safety, wellness and benefits

enrollment, but not all (70%).

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2017 BENEFITS STRATEGY & BENCHMARKING SURVEY Executive Summary & Strategic Insights 6

KEY FINDINGS & IMPLICATIONS

Some employers seek advisors as extensions of their

organization to help them navigate difficult benefit-

related tasks, and identify opportunities to improve

outcomes based on marketplace insights and expertise.

• For communications, most employers shifted

toward greater use of external support, including

38% overall and 53% of large organizations that

count on the help of vendors. At the other end of

the spectrum, just 3% overall and 11% of large

employers work with consultants that specialize

in this discipline.

• Sixteen percent (16%) of employers rely on health

plan vendors to administer wellness programs and

14% enlist the expertise of an outsourced wellness

vendor, including 24% of large.

• For pharmacy benefits, 19% of all and 50%

of large employers use a specialty pharmacy

benefit manager.

Long-term planning and a broader wellbeing strategy

that promotes employees’ physical, emotional,

financial, social and career health are gaining ground.

• While more than 70% of employers plan benefits

and compensation strategies annually, a higher

percentage reported a multi-year strategy for both

benefits (12%) and compensation (14%) in 2017.

Long-term planning is more common among upper

midsize and large employers.

• Growth in the adoption of wellness programs is

expected with 29% of employers planning to add

this benefit by 2019, potentially increasing total

use to 70%. Offerings are expanding to reflect

a broader wellbeing focus with 28% connecting

employees to volunteer opportunities, 27% fostering

community engagement and 18% offering other

social wellbeing initiatives.

• Financial wellbeing opportunities are promoted

by one-third of employers. Nearly half use auto-

enrollment for retirement planning to help employees

improve savings on target with their goals.

CLIMB

ClimbMeaningful changes to organizational culture take time,

including the engagement and wellbeing of employees.

The most successful employers pursue their long-term

goals with resolve, taking small and distinct steps to

measure progress. Those that have baseline measures

in place are looking to pair these data outputs with data

inputs from employees, gathered from their formalized

feedback on engagement and wellbeing. Through these

efforts, employers are better able to tie metrics on

healthcare costs, productivity, employee engagement

and other focal areas to broader strategic goals such

as market share, revenue and profitability. Insights

from the results of this process can drive continuous

improvement of employee engagement. The key

findings below are evidence of employers’ openness to

considering and adopting different and newer methods

of cost control that support employee needs. While

there’s more reliance on data to drive informed benefits

and compensation planning decisions, measurement

of programs currently offered to employees is a missed

opportunity for many.

Self-insurance, quality-focused and value-based tactics,

and consumer-directed health plans are incremental

steps employers are taking to control healthcare costs

and achieve employee wellbeing goals.

• There is a trend toward increased self-insurance of

medical plans among lower midsize (42%), upper

midsize (68%) and large employers (83%), up 8 to

10 percentage points from 2016.

• One-third or more of employers use quality-focused

and value-based tactics to control medical costs,

including cost-transparency tools, telemedicine, and

healthcare decision support for employees. Some

of the tactics employers expect to adopt by 2019

include cost-transparency tools (24%), healthcare

decision support (19%), and reference-based pricing

for healthcare services (11%).

• Looking to engage employees in their health and

healthcare spending, 44% of all and 72% of large

employers offer a consumer-directed or high-

deductible health plan.

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Arthur J. Gallagher & Co. AJG.COM 7

KEY FINDINGS & IMPLICATIONS

More employers need a reliable way to gauge the

effectiveness of programs and tactics used to enhance

the employee experience and strengthen engagement.

• The primary measure of communication success

is employee feedback and questions asked of

HR (74%). Large employers also rely heavily on

healthcare benefit enrollment trends (62%).

• Just 32% of all and 53% of large employers

conducted an engagement survey from 2015 to

2016, and 9% of those that didn’t run a survey

plan to do so by 2019.

• Among the 78% of employers that offer a

retirement program, only 37% take steps to

measure employee retirement readiness.

• While three-quarters of employers evaluate

wellness program performance, employee

participation is the leading indicator at 58%. Few

look at financial claims data (21%), the impact on

lost work time (6%) or lost productivity (3%).

Data increasingly helps employers prepare, refine and

reroute when environment or business dynamics shift.

• For benefits planning, the data source most

referenced by employers is their organization’s

current and projected financial performance at

68%. The use of benchmarking (59%) and multi-

year labor cost modeling (13%) rose in 2017.

• Compensation planning trends show more

application of all data types and resources except

for workforce characteristics. Double-digit increases

in the use of benchmarking information were

reported by 89% of large and 82% of upper midsize

employers. For upper midsize employers alone,

there was also a significant increase in factoring

their organization’s current and projected financial

performance (69%) and strategic plan (51%).

Achieving sustainable costs while engaging employees

and driving business growth can seem as precarious

as scaling Everest or ascending Denali. Yet, more

employers are building momentum for a fuller

employee experience of wellbeing that integrates

emotional, financial, social and career dimensions with

physical health. There’s also a trend toward easing cost

pressures by changing funding strategies, adding value-

based and quality-focused benefits, and encouraging

healthcare consumerism. Those that aspire to compete

at the highest level as a destination employer are

setting their sights on a more holistic and integrated

approach to total compensation management.

Increased data integration, longer-term planning and

the strategic use of external advisors help guide them

along this path.

Data-driven insights show many opportunities for

making steady progress toward better value from

health and human capital investments. When

employers assess total compensation trends — and

then map, measure and realign strategies and solutions

— they continue to reach new heights.

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2017 BENEFITS STRATEGY & BENCHMARKING SURVEY Executive Summary & Strategic Insights 8

View the latest reports at ajg.com/thoughtleaders

Q2

Q3

Q4

Q1

Q2

2017

Best-in-Class Benchmarking Analysis

Benefits Strategy & Benchmarking Survey

Human Capital Insights Report

2018

Final RemarksThe key findings and implications in this report offer you a data-guided compass for improving your marketplace

standing — including an ascent to destination-employer status. Employers are setting their sights on a broader

set of benefits to proactively address employee needs and human capital objectives while controlling costs and

managing risk. With a multi-year, holistic and integrated approach to human resource strategies, you can drive

better business results by creating the right environment for you and your employees to achieve targeted outcomes

and sustain success.

Additional Gallagher Thought LeadershipYear-round data and expertise on marketplace trends to help you drive decisions.

This Executive Summary is one of a series of benefits benchmarking and human resource reports produced

by Gallagher throughout the year. Together, they provide ongoing context and direction for helping you

optimize your human capital investment.

FINAL REMARKS

Analysis based on our annual survey that takes benchmarking a step further, shifting the focus away from “average” to give you perspective on what it takes to be a top-performing employer.

Annual survey providing insight into where you stand compared to your peers, so you can make data-driven decisions more closely aligned with your business performance goals.

Comprehensive outlook on current trends and strategies to help you successfully attract and engage top talent, control healthcare costs, increase employee total wellbeing and manage risk.

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Arthur J. Gallagher & Co. AJG.COM 9

About Gallagher If you could name one thing that drives your organization’s success, what would it be? Chances are, it’s your employees.

Attracting and retaining the right talent is a top priority for most organizations, but they struggle with managing the

costs in a highly competitive and complex climate. To secure your place as a destination employer, you need the right

data to make smart benefits decisions, to keep a firm grasp on the state of the employee benefits market, and to

focus on the needs of a diverse workforce while effectively communicating the value you offer your employees.

You’re not on this journey alone. Gallagher will work closely with you to map out a strategic, measurable and

customized plan that helps you invest wisely in your workforce. All aspects of your HR programs — compensation,

benefits, wellbeing, communication and culture — need to work together to effectively manage the risks associated

with your human capital. By developing benefit and HR programs that support a multigenerational workforce, you’ll

create a culture that’s focused on organizational health and your employees’ total wellbeing.

When you take this holistic approach to investing in your employees, you’ll have an engaged team that’s more

productive, more loyal and willing to support your organization’s journey to success. You’ll be in a strong position to

attract and retain the best talent and to prosper as an organization.

Arthur J. Gallagher & Co. (NYSE: AJG), an international insurance brokerage and risk management services firm, is

headquartered in Rolling Meadows, Illinois, has operations in 33 countries and offers client-service capabilities in

more than 150 countries around the world through a network of correspondent brokers and consultants.

ABOUT GALLAGHER

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17GBS25075B

CONTRIBUTORS

TERMS OF USEThe intent of this Survey is to provide you with general information regarding current practice within the employee benefits environment. The data does not constitute recommendations or other advice regarding employee benefit programs, and the user is in no way obligated to accept or implement any information for use within their organization(s). The decision to utilize any information provided rests solely with the user, and application of the data contained does not guarantee compliance with applicable laws or regulations regarding employee benefits. Information provided by the Survey, even if generally applicable, cannot possibly take into account all of the various factors that may affect a specific individual or situation. Additionally, practices described within the Survey should not be construed as, nor are they intended to provide, legal advice.

The Web Site and the Content do not constitute accounting, consulting, investment, insurance, legal, tax or any other type of professional advice, and should be used only in conjunction with the services of a Gallagher consultant and any other appropriate professional advisors who have full knowledge of the user’s situation.

Gallagher does not represent or warrant that the Content will be correct, accurate, timely or otherwise reliable. Gallagher may make changes to the Content at any time. Gallagher assumes no responsibility of any kind, oral or written, express or implied, including but not limited to fitness for a particular purpose, accuracy, omissions and completeness of information. Gallagher shall in no event whatsoever be liable to licensee or any other party for any indirect, special, consequential, incidental, or similar damages, including damages for lost data or economic loss, even if Gallagher has been notified of the possibility of such loss. For the purposes of this section the term “Gallagher” shall be construed so as to include Gallagher Surveys as a marketing division and/or Gallagher Benefit Services, Inc. and its affiliates.

Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc., a non-investment firm and subsidiary of Arthur J. Gallagher & Co., is a licensed insurance agency that does business in California as “Gallagher Benefit Services of California Insurance Services” and in Massachusetts as “Gallagher Benefit Insurance Services.” Certain appropriately licensed individuals of Arthur J. Gallagher & Co. subsidiaries or affiliates offer securities through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC and or investment advisory services through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Neither Kestra IS nor Kestra AS is affiliated with Arthur J. Gallagher & Co., or Gallagher Benefit Services, Inc. Neither Kestra AS, Kestra IS, Arthur J. Gallagher & Co., nor their affiliates provide accounting, legal, or tax advice. GBS/Kestra-CD(251617)Exp(072018)

© 2017 Gallagher Benefit Services, Inc.

All rights reserved. No part of this book, including the text, data, graphics, interior design and cover design may be reproduced or transmitted in any form, without explicit consent from Arthur J. Gallagher & Co.

Gallagher Benefit Services, Inc.www.ajg.com

Absence & Disability Agnes Nines [email protected]

CommunicationsMatt Frost [email protected]

Pepper Krach [email protected]

Dental Scott Morsch [email protected]

Graham Thompson [email protected]

Engagement Chris Dustin [email protected]

David Rowlee [email protected]

Life InsuranceJohn Neumaier [email protected]

MedicalKevin Cipoletti [email protected]

Chris Shofner [email protected]

Adam Wolff [email protected]

Barbara Yoshimura [email protected]

Pharmacy Mark Rosenberg [email protected]

Private ExchangeRick Strater [email protected]

Research & ReportingStephanie Bauman [email protected]

Chuck Reynolds [email protected]

RetirementDean Clune [email protected]

Bill Kline [email protected]

Survey Development Thomas Cummins [email protected]

Total RewardsScott Hamilton [email protected]

Kent Lonsdale [email protected]

Joseph Milano [email protected]

VoluntaryTim Easterwood [email protected]

Jim Evans [email protected]

WellbeingRebecca Kruske [email protected]

Ali Payne [email protected]

Kathleen Schulz [email protected]

Contributors


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